Homebuilding slows in April with both labor and lumber in short supply
“All of a sudden, these guys don’t have the wood to start supplying some of these jobs,” one analyst said.
Low interest rates and the desire for more living space during the pandemic have been pushing up prices and limiting the supply of available homes. But today we learned that housing starts fell more than 9% in April.
There are a few reasons why builders have been holding back on construction. Securing the parts that go into building a home has been tricky recently, thanks largely to the volatile price of lumber.
“I call it a hysterical market at this point,” said Brian Leonard, a lumber analyst at RCM Alternatives. He said prices have been rising throughout the pandemic, causing many builders to hold off on buying wood.
Last month, however, many realized they couldn’t wait any longer. Lumber prices spiked even more, and now supplies are thin. “The full-blown building season is basically, you know, April through August. And all of a sudden, these guys don’t have the wood to start supplying some of these jobs,” Leonard said.
Something else in short supply? Labor, said Brian Turmail with the Associated General Contractors of America. He said some construction workers worry about getting COVID-19 on the job site. They might also be receiving expanded unemployment insurance, or have found work in other industries.
“Our members are going to be competing with the energy sector, they’re going to be competing with the mining sector,” said Turmail.
Several other ingredients that go into building a new home have been stuck in the supply chain due to the ongoing congestion at U.S. ports. “Many builders are having difficulty finding appliances to put into new homes. And the new owners having to go out and buy those appliances,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.
There are signs that housing construction could pick up again. Building permits for single-family homes fell at a much slower rate than the drop in housing starts. Fratantoni said that’s a sign that homebuilders think building supplies and prices could start to stabilize. “That’s going to result in a lower overall price sometime down the road,” he said.